Ollie’s Bargain Outlet

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At the back of the new Ollie’s Bargain Outlet in Reading, Pa., is a self-serve café setup with a sign that proclaims: “The Pot’s Always On. Have a free cup of coffee on us, and if you like, use two sugars … it’s been a pretty good year!”

From the sounds of things, there hasn’t been a bad year since the first Ollie’s opened in Mechanicsburg, Pa., in 1982.

“We have never, ever had a store lose money in 30 years. When the economy is robust, we prosper because manufacturers have more outlet merchandise. When the economy is weak, people struggle and the consumer has a much greater appetite for deals,” said Mark Butler, one of the four original founders, and now president and CEO of the growing 130-unit chain. Sales are expected to reach $500 million (2012), with stores in 13 states.

Since 2008 and “the trade-down effect,” as Butler called it, Ollie’s has been a “rocket ship.”

“American’s have always loved a bargain; now they need a bargain,” he said.

With new backing from private equity firm CCMP Capital, whose other retail investments include Cabela’s and Francesca’s Collections, Ollie’s plans to grow to 250 doors by 2016, with about 23 openings in 2013.

Ollie’s guiding business has been the same since it was founded: Selling quality, name-brand, close-out merchandise in a folksy store environment. At a recent grand opening, Butler, wearing an Ollie’s logo shirt, circulated among the morning shoppers. His neighborly attitude cascades down to sales associates who are instructed to say “thank you” to all customers always.

“We just try to be nice to people,” said Butler, who gets recognized due to his TV and radio ad appearances. He also encourages direct consumer dialogue through the ‘Reach the President’ tab on the company’s website.

Ollie’s ‘Good Stuff Cheap’ slogan is posted on the front of stores and on flyers, along with an image of Ollie, a wild-haired man, who has an Einstein-like appearance. There is a 30-day ‘no hard time guarantee’ return policy.

“It is all in fun. It is unique old-time merchandising,” said Butler, who learned the retail trade from his older co-founder Mort Bernstein.

Co-founders Harry Coverman and Oliver “Ollie” Rosenberg were primarily equity partners. Of his late associates, Butler said, “Ollie had the most comical name and character.”

Ollie’s sites average 28,000 sq. ft. to 35,000 sq. ft., in locales with a population of at least 50,000 in a 10-mile radius. With bright lights, high shelving units and pallets, the company describes its stores as ‘semi-lovely.’

Stores offer 21 merchandise categories, with five — floor covering, domestics, housewares, food and books — accounting for 55% of sales. Ollie’s has an exclusive deal with Penguin Publishing for its children’s books on closeout and remainders. While categories are consistent, merchandise is ever-changing due to the nature of its sourcing.

Ollie’s merchandise and prices fall between those of Tuesday Morning and Big Lots. Aside from accrued discounts through the chain’s loyalty program, the company doesn’t do other sales or price promotions save for perhaps end-of-season clearance items.

Ollie’s trajectory began in earnest in 2003 when Butler, with help from SKM Equity (which sold its stake to CCMP this year), bought out his mentor Bernstein from the then 26-store company. Butler remains the private company’s largest single investor.

The majority of Ollie’s stores are in the Mid-Atlantic region, along with Ohio, Kentucky, Tennessee and Michigan. Next up are Connecticut and Indiana.

“We are only interested in adding contiguous states,” Butler said. “I am not interested in jumping over states and over regions.”

Keeping Ollie’s Ollie’s, however, is not so easy.

“It is a battle to maintain the culture,” said Butler, who has no desire to pursue e-commerce. “But I am the gatekeeper. The culture starts and stops at the top. We work hard at it.”